Unfortunately, not everything is within your control. You know that if your suppliers raise their prices, product price goes up, and what you charge your customers will have to too in order to maintain profits, or worse, take from your own pockets.
You’ll probably want to offer up dozens of discounts in other areas in order to maintain clients, but bending over backwards like this can be just as damaging to you and your business than outright telling your customers, like a cold slap in the face, that there’s going to be a price increase.
There’s got to be a good middle ground!
Here are 4 tips that will help you make the transition:
1) Know the ‘secret psychology’ of your customers. What is important to your customers beyond just price? It could be family safety, cleanliness, timeliness, amazing craftsmanship, professionalism, etc. When you go to your customers, keep in mind the key elements that make you and your company unique and better than the competition, in order to keep your customers.
2) Provide them the information ahead of time. Whether it’s online through blogs or social media, through personal email, or in-person, write about the fluctuations in the economy, talk about suppliers costs going up, and discuss seasonal changes and their effects on a contracting businesses— explain the what, who, when, how, and why. If you’re able to have an informal conversation relevant to price increases ahead of time, it lessens the blow for when it comes time to tell your customers prices are going up.
3) Practice having this conversation in a team meeting. Grab not only your sales and marketing team, but everyone you can! The more people that practice and know what they’re talking about, the better. Enough practice leads to a conversation that truly sounds authentic (because even if it really is, it can sometimes come off as an act to your customers; they’re smart and know what sounds valuable.)
4) Don’t get intimidated. There will always be customer’s that push back and argue over everything. Does that mean you should offer up dozens of discounts in other areas to please them? Not necessarily. Does that mean you should cave and maintain price just for them? No. Does it mean you should offer up a lower quality service or product in order to keep them? Not recommended. The thing is, you most likely will lose a few customers— these are customers we classify as ‘D’s as they only care about winning best price. In a professional, polite way, you must explain in detail why prices are increasing and how it’s important, as well as why they should stick with you (reflecting back on the ‘secret psychology’ and your practice conversations.)
When it comes down to it, telling customers your prices are increasing is never easy. Showing value to your customers in other areas, is. Rating clients accordingly will allow you to determine which clients can be offered specific discounts or deals, and which will be content with a polite explanation of the situation. If you’re curious about the ‘secret psychology’ of customers or how to rate your customers from class A-D and what that means, we have specific tools to help. Click here for a chat with Andrew to find out more.
All the best, Profit for Contractors.